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Which Gold Stocks Have the Best Dividend?

This sector isn't well-known for paying shareholders, but these companies manage to fit the bill.

Those who like getting income from their investment portfolios tend to love dividend stocks, because they not only pay reliable streams of income to shareholders, but also retain the potential for growth. Yet the mining industry is a capital-intensive one, and that makes it hard for most stocks that focus on gold, silver, and other precious metals to pay much in the way of dividends.

Still, some companies in the gold industry are able to pay dividends that are at least respectable. Some are traditional miners, while others use a business model other than mining to get exposure to precious metals in very different way. Below, we'll look at a handful of gold stocks that make the grade with solid dividends and potential for future growth.

Mining for dividends

These four companies make the list because of their balance between sustainable yield and dividend growth. Randgold isn't the highest-yielding stock in the industry, but it is profitable, and it recently took the extraordinary step of doubling its dividend. Yet some investors won't be happy about the fact that the mining company faces the potential for a devastating blow from the Congolese government, which is aiming to impose huge royalties and taxes on profits that could make mining in the African nation a lot more economically challenging. Given that Randgold's Kibali mine is one of the biggest anywhere and is instrumental to the company's success, investors are nervously watching the miner's negotiations to try to forestall governmental action.

Less risky from an operational standpoint is Newmont. The company has operations scattered in many different countries, many of them having quite stable political situations that take away some of the regulatory risk its peers face. Dividend investors also like the fact that Newmont has a clearly stated dividend policy that's tied to the price of gold, with annual dividends ranging from $0.10 to $1.10 per share depending on where gold prices come in along a spectrum of $1,150 to $1,700 per ounce. With the company having taken steps to rein in costs and boost cash flow from production, the results have been encouraging thus far.

Image source: Newmont Mining.

Streaming for gold -- and cash

The other two companies on this list aren't traditional miners. Instead, they are financing companies, offering capital for investment in exchange for the right to purchase production streams of gold and other metals and discounted prices. The business model has worked well both for Franco-Nevada and for Royal Gold, both of which have seen big share-price gains over the past decade. Franco-Nevada also sports a 10-year streak of rising annual dividend payouts, while Royal Gold has an even longer 17-year track record of dividend growth.

Both companies are looking to make strategic moves, but they're moving in different directions. Franco-Nevada has turned to the energy industry for future investment deals, and even though it has continued to invest in precious metals streams, it wants to have a slightly more balanced natural resources portfolio in the long run. Royal Gold has diverted more money toward improving its balance sheet, reducing leverage but offering greater stability. Moreover, Royal Gold's past investments have centered largely on start-ups, and it hopes to see new streams of metals come online in the near future to help bolster further growth.

Get the dividends you need

These four companies take different approaches toward the gold industry and the way in which they pay dividends. Yet all four have been good to shareholders in sharing their bounty. As long as the gold market remains healthy, dividend investors can expect these four stocks to remain good choices for both income and possible capital appreciation.

Author

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.
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